Former Vita Foods directors not negligent, judge rules

The former board of directors for Chicago-based Vita Foods Products Inc. did not shirk its fiduciary duties in taking the company private in 2009, a Cook County Circuit Court judge has ruled.

In a ruling issued Dec. 4, Judge Thomas Hogan determined that two directors, Howard Bedford, former president of investment advisory firm Bedford Group, and David Lipson, Vita's former chairman, who died in April, did not act against the best interests of the shareholders of the company known for its smoked salmon and cured herring products.

During the trial last month, Judge Hogan dismissed complaints against four other company directors: Clifford Bolen, Vita Foods' chief executive officer; Robert Douglas, former president of Mid-Continent Capital LLC; board member Edward Dolanski, president and chief executive officer of Boeing Co. subsidiary Aviall Inc.; and David Allen, president of Allomet Partners LLC, a New York investment banking firm.

"They did everything right from forming a special committee, to hiring independent consultants, hiring independent advisers, to negotiating a price and trying to find other offers," said Steve Blonder, a principal at Much Shelist PC, which represented the defendants.

Stephen Rubin, Vita's former chairman and Mr. Bolen's predecessor as CEO, disagreed. He, along with other shareholders, filed a lawsuit in U.S. District Court in the Northern District of Illinois in 2009, which was dismissed a year later. Then, in August 2010, he sued in Cook County Circuit Court, claiming the directors failed to get the highest price possible.

Art Gold, an attorney for the 29 plaintiffs, said they are considering an appeal to the Mr. Hogan’s rulings.

“I am disappointed that the judge didn’t assess damages against the six directors for taking Vita private the way they did,” said Mr. Gold, of Chicago law firm Gold & Associates Ltd.

Vita Foods, once a public company, began to struggle financially in the early 2000s. The company delisted its shares from the American Stock Exchange in 2007 and began trading on the pink sheets.

Mr. Bedford, now Vita Foods' sole director, offered to buy all of the company's outstanding shares, with the exception of those owned by Mr. Rubin, for 30 cents each. Mr. Rubin later decided to sell his shares to Mr. Bedford. The final deal called for a purchase price of $1.05 per share for all outstanding shares, a price that Mr. Rubin and some investors said was too low.

"They were suggesting a price of $3.50 to $4 despite that all of 2008 the stock traded under $1 all year," Mr. Blonder said.

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